Strategic investor is a business operator acting on the capital market, which under the relevant legislation obtained permission to acquire large blocks of shares of privatized state enterprises, having in another unit more than 50% of the shares. It has explicit funding mechanisms designed to secure the further development of the company and the relevant qualifications consistent with the scope of the company.
Investment horizon of the strategic investor is unlimited. This follows from the nature of the investment itself. Acquired company is part of a long-term development strategy of the investor, and therefore he never defines the investment horizon.
Goodwill valuation method that a strategic investor uses significantly deviates from the valuation techniques of financial investors. Strategic investor usually bases on the intrinsic value method of valuing a company, measured by the quality of professionals employed, its know-how, and above all company's technology and market share.
Strategic investor seeks to take full control over the acquired business. The added value for the investor is created due to assimilation of industry and key assets of the acquired company's resources. Investor introduces his own system of management, technology, and often the brand.
Strategic investor usually also introduces his own concept of the future business development. The previous owner may affect the overall strategy, if he remains a partial shareholder. Strategic investor may seek to change the firm's managerial staff. The holding company acquires the benefits associated with an increase in goodwill. Non-productive burden fall on the investor.
Main tasks of strategic investor
- Acquisition of full control over the process of development.
- Ensuring close coordination of the approved development plans.
- Caring for the high intensity of investment, crucial to raise the value of the company.
- Reducing public investment, and thus minimizing the risk to the state budget.
- Dess, G. G., Lumpkin, G. T., & Eisner, A. B. (2010). Strategic management: Text and cases.